Oil Rises as Saudi Outlays Shrink Amid Simmering Demand Fears

Trump says planned trade talks with China could be called off
WTI rises 1.3%, reversing earlier decline of as much as 1.8%

By Kiran Dhillon

(Bloomberg)

Oil rose, shaking off earlier losses, as the world’s biggest oil exporter opened its books to investors and a deepening trade war between China and the U.S. imperiled global energy demand.

Futures traded up as much as 1.3% in New York on Monday. Saudi Arabia’s state-owned oil explorer said spending on new wells and other projects dropped 12% in the past year, a potential harbinger of tightening supplies. Meanwhile, U.S. President Donald Trump said trade talks with China set for next month may fall through, and American orders for gasoline from European refiners waned.

“We’re seeing mixed support on prices as I think markets remain pulled between demand concerns and supply threats,” said Ashley Petersen, lead oil market analyst at Stratas Advisors.

Overall, crude remains down this month on fears the U.S.-China trade spat may expand into a currency war. The International Energy Agency on Friday trimmed its forecasts for oil-demand growth this year and next, and warned that it may lower the estimates further as the trade conflict drags on.

West Texas Intermediate crude for September delivery gained 35 cents to $54.85 a barrel at 12:40 p.m. on the New York Mercantile Exchange. The contract advanced 3.7% on Friday, trimming a second weekly loss.

Brent for October settlement added 5 cents to $58.58 on the ICE Futures Europe Exchange. The contract slumped 5.4% last week.

See also: Demand For Oil Is Getting Gloomy: Julian Lee

Trump said earlier this month that new tariffs on Chinese imports will take effect Sept. 1, shattering a truce reached with President Xi Jinping weeks earlier. It unleashed tit-for-tat actions on trade and currency policy that risk accelerating a wider geopolitical fight between the two countries.

Meanwhile, unnamed Saudi Arabian officials said last week the kingdom plans to keep crude exports below 7 million barrels a day in September as it allocates less oil than customers demand. Aramco will provide customers across all regions with 700,000 barrels a day less than they requested, the officials said.

Aramco’s move to diversify from Saudi Arabia by buying a stake in Indian refiner Reliance precedes a planned public offering that could be held as early as next year.

Oil-market news

Gasoline futures fell 45 cents to 1.6695 a gallon.

Aramco will buy a stake in the refining and chemicals business of India’s Reliance Industries Ltd., moving to diversify from Saudi Arabia as its first half-year earnings report showed a drop in net income.
Money managers increased by 5.4% their net bets that WTI crude would rally even as futures tumbled in the week ended Aug. 6, data released Friday show.
American oil explorers, harried by investors to scale back spending, idled drilling rigs for a sixth straight week.

With assistance from James Thornhill, Grant Smith and Heesu Lee.

To contact the reporter on this story:
Kiran Dhillon in New York at kdhillon18@bloomberg.net

To contact the editors responsible for this story:
Simon Casey at scasey4@bloomberg.net
Joe Carroll, Christine Buurma